Npa

COMPREHENSIVE PROJECT ON NPA MANAGEMENT IN PUBLIC & PRIVATE BANKS SUBMITTED BY
ASHISH M PANDYA
097700592011 ASHUTOSHKUMAR SINGH 097700592049 GUIDED BY
PROF. KAUSHAL BHATT

SUBMITTED TO JAYSUKHLAL VADHAR INSTITUTE OF MANAGEMENT STUDIES (JVIMS) BIPIN T. VADHAR COLLEGE OF MANAGEMENT JAMNAGAR AFFILIATED TO GUJARAT TECHNOLOGICAL UNIVERSITY AHMEDABAD
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DECLARATION
I undersigned ASHISH M PANDYA a student of MBA 4th semester; declare that I have prepared this project on NPA MANAGEMENT OF PUBLIC & PRIVATE BANKS under guidance of Mr. KAUSHAL BHATT of JVIMS. I also declare that this project is my own preparation and not copied from anywhere else.
Ashish M Pandya
Acknowledgement
To acknowledge is very great way to show your gratitude towards the persons who have contributed in your success in one or other way. Its my great pleasure to present this project report on NPA MANAGEMENT IN BANKS (With special reference to Pubic and Private sector Banks) fulfilment of post-graduate course M.B.A 2009-2011. At the outset of my report I would like to express my gratitude to my institute Shri Jaysukhjlal Vadher Institute of Management Studies where I had completed my two years certification course with this grand project. I am thankful to our project guide Mr. Kaushal Bhatt for his continuous guidance and supervision and support during the project period. I am also thankful to my entire college lecturer team who have spared sometime and helped me out to carry on my project work successfully at the best level.
ASHISH M. PANDYA MBA
PREFACE
In this changing economic scenario the corporate sector has been feeling the constant need of funds. The appetite for the funds is increasing day by day due to the opportunities offered by the globalizations and the vistas which the Indian economy has been opened up for the foreign investors. These investors are on constant look out for the joint sector partners in India. The hunger of the corporate sector has been on constant increase as the Indian financial institutions are not able to 5ounse the demand on account of the liquidity crunch being faced by them. In this context, one route available to the corporate sector is to patronize the Public & Private Banks, for the management of funds and allied advisory services. Some of these Public & Private Banks are flushed with funds and can be compared with small commercial banks. Their role is appreciated not only on account of these funds which are made available to the corporate clients but also for the quality of services being rendered by them. The role of the Public & Private Banks in the current context cannot be undermined in any fashion. These are the edifice involved in the process of nation building, providing a helping hand to the government, so far as the canalizations of the savings of the society to the industry is concerned. The efforts made by these Public & Private Banks, these deserved appropriations from all sector of society. These companies are engaged in various activities rendering both fund based as well as non-fund services. Important fund based include lease finance, hire purchase finance, consumer finance, working capital loans, inter corporate investment, bill discounting, factoring, venture capital financing, mutual funds, housing finance, etc. Whereas non funds based services include managing mergers and amalgamations, lease broking, corporate Counselling and capital restructuring, project Counselling, credit rating, managing fixed deposits, money market operations, dealing in foreign exchanges and money changing, doing business of custodian and depositors, etc
EXECUTIVE SUMMARY
After liberalization the Indian banking sector developed very appreciate. The RBI also nationalized good amount of commercial banks proving socio economic services to the people of the nation. The public Sector banks have shown very good performance as far as the financial operations are concerned. The total income of the public sector banks has also shown good performance since the last few years. The public sector Banks have also shown comparatively good result. The gross profits and the net profits of the Public Sector banks have been on a high from past few years. The private sector banks are also showing good results in case of profits. However, the only problem of the Scheduled Commercial Banks these days are the increasing level of the non performing assets. The Non-Performing Assets (NPAs) problem is one of the foremost and the most formidable problems that have shaken the entire banking industry in India like an earthquake. Like a canker worm, it has been eating the banking system from within, since long. It has grown like a cancer and has infected every limb of the banking system. At macro level, NPAs have choked off the supply line of credit to the potential borrowers, thereby having a deleterious effect on capital formation and arresting the economic activity in the country. At the micro level, the unsustainable level of NPAs has eroded the profitability of banks through reduced interest income and provisioning requirements, besides restricting the recycling of funds leading to serious asset liability mismatches. The problem of NPAs is not a matter of concern for the lenders alone. It is a matter of grave concern to the public as well, as bank credit is the catalyst to the economic growth of the country and any bottleneck in the smooth flow of credit, one cause for which is mounting NPAs, is bound to create adverse repercussions in the economy. Mounting menace of NPA has raised the cost of credit, made banks more adverse to risk and squeezed genuine small and medium enterprise from accessing competitive credit and has throttled their enterprising spirits as well. The spiralling and the devastating effect of NPA on the economy have made the problem of NPA as issue of public debate and of national priority. Therefore, any measure or reform on this front would be inadequate and incomprehensive, if it fails to make a dent in NPA reduction and stall their growth in future, as well.
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INDEX
CHAP. NO 1 2 3 4 5 6
PARTICULARS
PAGE NO.
INTRODUCTION TO BANKING INDUSTRY CONCEPT OF NPA RESEARCH METHODOLOGY ANALYSIS OF NPA FINDINGS AND SUGGESTIONS BIBLIOGRAPHY
Chapter-1
Introduction of INDIAN BANKING INDUSTRY
INRODUCTION TO BANKING:
Banking is nothing but a service. Banks are business organizations selling banking services. Banks continuously reassess how a customer views bank services, what are new and emerging customer aspirations and how these can be satisfied.
ORIGIN:
Since the banking activities were started in different periods in different countries, there is no unanimous view regarding the origin of the word bank. The word bank is derived from the French word banco or Bancus , which means a bench. In fact the early Jews in Lombardy transacted their banking business sitting on benches. When the business ailed, the benches were broken and hence the word bankrupt came in to vogue.
DEFINITION:
The Indian Banking Companies Act, 1949 section 5(b), defines banking as Accepting for purpose of lending or investing of deposits from the public, repayable on demand or otherwise and withdrawals by cheque, drafts, and orders or otherwise . Banks are backbone of our society. A bank must meet the financial needs of a customer, by acting as a custodian of his assets, providing credit facilities and assisting him to speedily put through financial transaction of one type or another. Banking when you come to think of it are people. It is not figures, files and ledgers. Bank services needs considerable improvement on an emergent basis. The time has come for banks to look inward to find out what is the nature and quality of the products they sell, what is the product demanded by the customer. It would be unrealistic today to believe that banks are mere financial institutions, working for profit. Banks essentially are now social organizations, regarding financial services to sub serving the socio-economic objectives of the society.
BANKING SYSTEM IN INDIA

1.4) BANKING
SYSTEM IN INDIA
Apex Banking Institution
RBI
IDBI Commercial Nation al Level C.B State Level Export Import Bank of India (EXIM-BANK) IIBI NABARD
India Foreign
IFCI Publi c secto r Privat e Secto r
ICICI
SIDBI Cooperative Land Development Ban k
State Cooperative
State Land Developme nt
Central (District) cooperative
Primary Land Developme nt
Primary Cooperative
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IN INDIA:
India has a system of indigenous banking from very early times, though it was not similar to banking of modern times. There is evidence to show that money lending existed even during the Vedic period. With the advent of the English traders in the seventeenth century and the establishment of trading centres by the East India Company encouraged the establishment of what were known as the agency houses? The trading firms which undertook banking operations for the benefit of their constituents. Some of the houses established during the period were Alexander and Co. and Ferguson & Co. There were also Presidency Banks, Joint stock banks and Exchange banks which took up gradually one after the other.
IMPERIAL BANK:
The Presidency Banks referred to above were amalgamated into the Imperial Bank of India, which was brought into existence on 27th January 1921 by the Imperial Bank of India Act 1920. This Act, however, gave the bank no power to issue notes and this left out without control over the currency of the country. But it was allowed to hold Government balances and to manage public debt and clearing houses till the establishment of Reserve Bank Of India in 1935 which apart from taking over all these functions from the Imperial Bank of India, was given the privilege of acting as an agent of the latter in places where it had no branches.
COMMERCIAL BANKS:
Amongst the banking institutions in the organized sector, the commercial banks initially were established as corporate bodies with share holdings by private individuals, but subsequently there has been a drift towards central ownership and control. Today 27 banks constitute the strong public sectors in Indian Commercial Banking. Up to late 60s Commercial Banks are mainly engaged in financing organized trade, commerce & industry , since then they are actively participating in financing agriculture, small-scale business and small borrowers also.
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FUNCTIONS OF COMMERCIAL BANKS:

Commercial banks perform several crucial functions, which may be classified into two categories: (a) Primary functions and (b) Secondary functions
(a)
PRIMARY FUNCTIONS:
Primary banking functions of the commercial banks include: I) Acceptance of deposits from public II) Lending funds III) Use of cheque system and IV) Remittance of funds
(b)
SECONDARY FUNCTIONS:
Commercial banks perform a multitude of other non banking functions, which may be classified as (a) Agency service (b) General utility services
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NATIONALIZATION OF COMMERCIAL BANKS:

The nationalization of banks in India took place in 1969 by Mrs. Indira Gandhi the ten prime minister. It nationalized 14 banks then. These banks were mostly owned by businessmen and even managed by them. Central bank of India Bank of Maharashtra Dena Bank Punjab National Bank Syndicate Bank Canara Bank Indian Bank Indian Overseas Bank Bank of Baroda Union Bank Allahabad Bank United Bank of India UCO Bank Bank of India
Before the steps of nationalization of Indian banks, only State Bank of India (SBI) was nationalized. It took place in July 1955 under the SBI Act of 1955. Nationalization of Seven State Banks of India (formed subsidiary) took place on 19 July, 1960. The State Bank of India is India's largest commercial bank and is ranked one of the top five banks worldwide. It serves 90 million customers through a network of 9,000 branches and it offers -- either directly or through subsidiaries - a wide range of banking services. The second phase of nationalization of Indian banks took place in the year 1980. Seven more banks were nationalized with deposits over 200 crores. Till this year, approximately 80% of the banking segments in India were under Government ownership. After the nationalization of banks in India, the branches of the public sector banks rose to approximately 800% in deposits and advances took a huge jump by 11,000%.
th
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1955: Nationalization of State Bank of India. 1959: Nationalization of SBI subsidiaries. 1969: Nationalization of 14 major banks. 1980: Nationalization of seven banks with deposits over 200 crores.
THE RESERVE BANK OF INDIA [RBI]:

The Central Bank of India called the Reserve Bank of India was constituted under the Reserve Bank of India Act, 1934 to regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of India to its advantage. Amongst its multifarious functions affecting the Indian Financial System, the RBI regulates and prohibits the issue of prospectus or advertisement soliciting deposits of money, regulates the functioning of non-banking institutions and transacts Government business. Its regulatory involvement in the Indian Capital Markets is primarily of debt management through primary dealers, foreign exchange control and liquidity support to market participants. The RBI regulates participants in the securities markets when a foreign transaction is involved. Transactions that include Indian issuers issuing of security outside India, such as GDRs and ADRs, and Financial Institutional Investors (FIIs) or Foreign Brokers selling, buying or dealing in Indian Securities need the permission of RBI. As the central banking authority of India, the Reserve Bank of India performs the following traditional functions of the central bank: It provides currency and operates as the clearing system for the banks. It formulates and implements monetary and credit policies. It functions as the bankers bank. It supervises the operations of credit institutions. It regulates foreign exchange transactions. It moderates the fluctuations in the exchange value of the rupee. In addition to the traditional function of the central banking authority, the Reserve Bank of India performs several functions aimed at developing the Indian financial system:
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It seeks to integrate the unorganized financial sector with the organized financial sector. It encourages the extension of the commercial banking system in the rural areas. It influences the allocation of credit. It promotes the development of new institutions.
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Chapter-2
CONCEPT OF NPA
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Non-Performing Assets - Background:` Introduction:

It's a known fact that the banks and financial institutions in India face the problem of swelling non-performing assets (N.P.As) and the issue is becoming more and more unmanageable. In order to bring the situation under control, some steps have been taken recently. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was passed by Parliament, which is an important step towards elimination or reduction of N.P.As.
Meaning of N.P.As:
An asset is classified as non-performing asset (N.P.As) if dues in the form of principal and interest are not paid by the borrower for a period of 180 days. However with effect from March 2004, default status would be given to a borrower if dues are not paid for 90 days. If any advance or credit facilities granted by bank to a borrower becomes non-performing, then the bank will have to treat all the advances/credit facilities granted to that borrower as non-performing without having any regard to the fact that there may still exist certain advances / credit facilities having performing status.
Indian economy and N.P.As:

Undoubtedly the world economy has slowed down, recession is at its peak, globally stock markets have tumbled and business itself is getting hard to do. The Indian economy has been much affected due to high fiscal deficit, poor infrastructure facilities, sticky legal system, cutting of exposures to emerging markets by FIIs, etc. Further, international rating agencies like, Standard & Poor have lowered India's credit rating to sub-investment grade. Such negative aspects have often outweighed positives such as increasing forex reserves and a manageable inflation rate. Under such a situation, it goes without saying that banks are no exception and are bound to face the heat of a global downturn. Bankers have realized that unless the level of N.P.As is reduced drastically, they will find it difficult to survive.
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Global Developments and N.P.As:

The core banking business is of mobilizing the deposits and utilizing it for lending to industry. Lending business is generally encourage because it has the effect of funds being transferred from the system to productive purposes, which results into economic growth. However lending also carries credit risk, which arises from the failure of borrower to fulfill its contractual obligations either during the course of a transaction or on a future obligation. A question that arises is how much risk can a bank afford to take? Recent happenings in the business world - Enron, WorldCom, Xerox, Global Crossing do not give much confidence to banks. In case after case, these giant corporates became bankrupt and failed to provide investors with clearer and more complete information thereby introducing a degree of risk that many investors could neither neither anticipate nor welcome. The history of financial institutions also reveals the fact that the biggest banking failures were due to credit risk. Due to this, banks are restricting their lending operations to secured avenues only with adequate collateral on which to fall back upon in a situation of default.
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Why N.P.As have become an issue for banks and financial Institutions in India? To start with, performance in terms of profitability is a benchmark for any business enterprise including the banking industry. However, increasing N.P.As have a direct impact on banks profitability as legally banks are not allowed to book income on such accounts and at the same time banks are forced to make provision on such assets as per the Reserve Bank of India (RBI) guidelines. Also, with increasing deposits made by the public in the banking system, the banking industry cannot afford defaults by borrowers since N.P.As affects the repayment capacity of banks. Further, Reserve Bank of India (RBI) successfully creates excess liquidity in the system through various rate cuts and banks fail to utilize this benefit to its advantage due to the fear of burgeoning nonperforming assets.
Basis of Assets:
Non
Performing
The basis of treating a credit facility as N.P.As is as detailed below: ASSET: In respect of which interest has remained past due for six months. TERM LOAN: Inclusive of unpaid interest, when the instalments is overdue for more than six months/on which interest amount remained past due for six months. BILL: Which remains overdue for six months? OTHER CURRENT ASSETS: The interest in respect of a debt/income on a receivable in the nature of short-term loans/advances, which remains overdue for a period of six months. SALE OF ASSETS/SERVICE RENDERED: Any dues on account of these/ reimbursement of expenses rendered, which remained overdue for a period of six months. LEASE RENTAL/HIRE PURCHASE INSTALMETS: The instalments which has become overdue for a period of more than twelve months. OTHER CREDIT FACILITES The balance outstanding including interest accrued made available to the borrower/beneficiary in the same capacity when any of the credit facilities become N.P.A.
Regulations for asset classification:

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Assets are classified into four classes - Standard, Sub-standard, Doubtful, and Loss assets. NPA consist of assets under three categories: sub-standard, doubtful and loss. RBI for these classes of assets should evolve clear, uniform, and consistent definitions. The banks should classify their assets based on weaknesses and dependency on collateral securities into four categories:
i.
Standard Assets:
It carries not more than the normal risk attached to the business and is not an NPA. Standard assets are the ones in which the bank is receiving interest as well as the principal amount of the loan regularly from the customer. Here it is also very important that in this case the arrears of interest and the principal amount of loan do not exceed 90 days at the end of financial year. If asset fails to be in category of standard asset that is amount due more than 90 days then it is NPA and NPAs are further need to classify in sub categories.
ii.
Sub-standard Asset:
A sub-standard asset is one which has remained NPA for a period less than or equal to 12 months from 31.3.2005. In such case the current net worth of the borrower/guarantor or the current market value of the security charged is not enough to ensure recovery of the dues to the banks in full. In other words, such an asset will have well defined credit weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the banks will sustain some loss, if deficiencies are not corrected.
iii.
Doubtful Assets:
With effect from 31.3.2005, an asset is to be classified as doubtful, if it has remained NPA for a period exceeding 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as sub-standard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values- highly questionable and improbable. Under this category there are three stages: I) Doubtful up to one year. II) Doubtful for further two years. III) Doubtful beyond three years.
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iv. Loss Assets:

An asset identified by the bank or internal/ external auditors or RBI inspection as loss asset, but the amount has not yet been written off wholly or partly. The banking industry has significant market inefficiencies caused by the large amounts of Non Performing Assets (NPA) in bank portfolios, accumulated over several years. Discussions on non-performing assets have been going on for several years now. One of the earliest writings on NPA defined them as "assets which cannot be recycled or disposed off immediately, and which do not yield returns to the bank, examples of which are: Overdue and stagnant accounts, suit filed accounts, suspense accounts and miscellaneous assets, cash and bank balances with other banks, and amounts locked up in frauds".
Types of NPA
A] Gross NPA B] Net NPA
A] Gross NPA:
Gross NPAs are the sum total of all loan assets that are classified as NPAs as per RBI guidelines as on Balance Sheet date. Gross NPA reflects the quality of the loans made by Banks. It consists of all the non standard assets like as sub-standard, doubtful, and loss assets. It can be calculated with the help of following ratio: Gross NPAs Ratio: Gross NPAs Gross Advances
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B] Net NPA:
Net NPAs are those type of NPAs in which the bank has deducted the provision regarding NPAs. Net NPA shows the actual burden of banks. Since in India, bank balance sheets contain a huge amount of NPAs and the process of recovery and write off of loans is very time consuming, the provisions the banks have to make against the NPAs according to the central bank guidelines, are quite significant. That is why the difference between gross and net NPA is quite high. It can be calculated by following. Net NPAs: Gross NPAs Provisions Gross Advances - Provisions
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Chapter-3
RESEARCH METHODOLO GY
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MEANING OF RESEARCH
The research methodology means the way in which we would complete our prospected task. Before undertaking any task it becomes very essential for anyone to determine the problem of study. I have adopted the following procedure in completing my report study. Formulating the problem Research design Determining the data sources Analysing the data Interpretation
Research is simply the process of arriving as dependable solution to a problem through the planned and systematic collection, analysis and interpretation of data. The term research consists of two words: Research = Re + Search Re means again and Search means to find out something.
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STEPS FOR RESEARCH METHODOLOGY (1) Formulating the problem: I am interested in the banking sector and I want to make my future in the banking sector so decided to make my research study on the banking sector. I analysed first the factors that are important for the banking sector and I came to know that providing credit facility to the borrower is one of the important factors as far as the banking sector is concerned. On the basis of the analysed factor, I felt that the important issue right now as far as the credit facilities are provided by bank is non performing assets. I started knowing about the basics of the NPAs and decided to study on the NPAs. So, I chose the topic Non Performing Assets Management of Public and Private Sector Banks. (2) Research Design: The research design tells about the mode with which the entire project is prepared. My research design for this study is basically descriptive and analytical. Because I have utilised the large number of data of the Public and Private Sector Banks. (3) Determining the data source: The data source can be primary or secondary. The primary data are those data which are used for the first time in the study. However such data take place much time and are also expensive. Whereas the secondary data are those data which are already available in the market. These data are easy to search and are not expensive too. For my study I have utilised totally the secondary data. (4) Analysing the data: The primary data would not be useful until and unless they are well edited and tabulated. When the person receives the primary data many un useful data would also be there. So, I analysed the data and edited them and turned them in the useful tabulations. So, that can become useful in my report study.
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(5) Interpretation of the data: With use of analysed data I managed to prepare my project report. But the analyzing of data would not help the study to reach towards its objectives. The interpretation of the data is required so that the others can understand the crux of the study in more simple way without any problem so I have added the chapter of analysis that would explain others to understand my study in simpler way. (6) Project writing:This is the last step in preparing the project report. The objective of the report writing is to report the findings of the study to the concerned authorities.
TOOLS OF ANALYSIS
RATIO ANALYSIS FOR NPA
Factor contributing to Non- performing assets, the major components like Total advances, Operating profit, Net profit and Total Assets have been considered. Ratios like: Gross NPA to Gross Advances Net NPA to Net Advances Interest income to working funds Operating expense to total income Net profit to total assets Total investment to total assets Gross NPA to total assets Net NPA to total assets Percentage change in gross NPAs Percentage change in gross NPAs
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3.4) STATISTICAL TOOLS

MEAN:
In mathematics and statistics, the arithmetic mean (or simply the mean) of a list of numbers is the sum of the entire list divided by the number of items in the list. If the list is a statistical population, then the mean of that population is called a population mean. If the list is a statistical sample, we call the resulting statistic a sample mean. The mean is the most commonlyused type of average and is often referred to simply as the average. The term mean or arithmetic mean is preferred in mathematics and statistics to distinguish it from other averages such as the median and the mode. The arithmetic mean is the standard average, often simply called the mean.
STANDARD DEVIATION:
In statistics, standard deviation is a simple measure of the variability or dispersion of a data set. A low standard deviation indicates that the data points tend to be very close to the same value (the mean), while high standard deviation indicates that the data are spread out over a large range of values. In addition to expressing the in statistical conclusions. variability of a population, standard deviation is commonly used to measure confidence
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CO-EFFICIENT OF VARIANCE
In probability theory and statistics, the coefficient of variance (CV) is a normalized measure of dispersion of a probability distribution. It is defined as the ratio of the standard deviation to the mean. This is only defined for non-zero mean, and is most useful for variables that are always positive. It is also known as unitized risk. The coefficient of variation should only be computed for data measured on a ratio scale. It does not have any meaning for data on an interval scale.
TWO- WAY ANOVA TABLE

The ANOVA procedure is one of the most powerful statistical techniques. ANOVA is a general technique that can be used to test the hypothesis that the means among two or more groups are equal, under the assumption that the sampled populations are normally distributed. The two-way analysis of variance is an extension to the one-way analysis of variance. There are two independent variables (hence the name two-way).
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TWO-WAY ANOVA TABLE
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HYPOTHESIS OF STUDY Statement for Hypothesis:

Ho: There is no significant difference in Gross NPA to Gross Advances Ratio in selected banks during the study period. Ho: There is no significance difference in Net NPA to Net Advances Ratio in selected banks during the study period. Ho: There is no significant difference in Operating Expense to Total income Ratio in selected banks during the study period. Ho: There is no significant difference in Net Profit to Total Assets Ratio in selected banks during the study period. Ho: There is no significance difference in Total Investment to Total Assets Ratio in selected banks during the study period. Ho: There is no significance difference in Gross NPA to Total Assets Ratio in selected banks during the study period. Ho: There is no significance difference in Net NPA to Total Assets Ratio in selected banks during the study period. Ho: There is no significance difference in Interest Income to Working Funds Ratio in selected banks during the study period.
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The project is to determine how to manage the Non Performing Assets in Banks and what is the trend of NPAs from the past years. To carry out the study regarding NPAs which is of great concern in todays scenario, a very simple approach is followed to draw a conclusion. The comparison is done between the data of private sector banks and public sector banks. The hypothesis testing will help us in formulating an outcome. Since this being a descriptive research much emphasis will be given on comparison analysis of various years secondary data to carry out an inference.
SCOPE OF THE STUDY
The scope of the study is limited to the objectives as mentioned earlier. The study ranges from understanding the significance of non-performing assets to defining the criteria of identifying non-performing assets in the banking sector, to review of Public and Private Banks performance in the management of non-performing assets. It also reviews the framework of Banks recovery policy with which it hopes to bring down the percentage of net non-performing assets to the net advances. The study also encompasses the recommendations, the adhering of which will bring good results to the organization.
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SAMPLING
To prepare this Project we took five banks from PUBLIC sector such as BANK OF BARODA BANK OF INDIA DENA BANK STATE BANK OF INDIA CENTRAL BANK OF INDIA as well as five PRIVATE sector. ICICI BANK AXIS BANK HDFC BANK KOTAK BANK ING VYASYA BANK
PERIOD OF THE STUDY

The study covers a period of five financial years from 2005-06 to 2009-10.
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REVIEW OF LITERATURE
Magazine name CAPITAL MARKET Dec. 2009 issue : The article taken for reference from this magazine and the article is named Short term pains, long-term gain on. It discusses about the rising NPAs, increase in provision coverage, sluggish credit offtake and dwindling treasury income. It states that these measures are going to set ways for better valuations. It tells about how the BSE Bankex has outperformed the BSE Sensex by recording robust returns of 174%. It discusses about various banks namely Bank of India, Union Bank of India, State Bank of India, Bank of Baroda, Punjab National Bank and IndusInd Bank have reached their all time high during Oct. Nov. 2009 period. It discusses about the preparedness of various banks for reducing NPAs i.e. by improving capital adequacy ratio, increasing the minimum provision coverage ratio, introducing new policies for broader interest rate regime, creating more transparent system and extending banking reach. It also discusses about the benchmark prime lending rate (BPLR) concept of RBI which helps to ensure appropriate pricing of loans. Magazine name BUSINESS TODAY Dec. 2009 issue : The magazine gives us the data about the various commercial banks operating in India and Ranks them according to four groups namely Large banks, Midsize banks, Small banks and Very Small banks. From the data given in the magazine done by BT-KPMG study is clear that despite the global credit crisis continues to take its toll- last month the 100th US bank collapsed since Lehman Brothers the Indian Banks continue to do business as usual and the result is given in numbers through this survey.
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Non-performing Assets of Scheduled Commercial banks in India: An Analysis analyzed all the three groups (public, private and commercial banks).
In his paper on Non-performing Assets of Scheduled Commercial banks in India: An Analysis analyzed all the three groups (public, private and commercial banks). He concluded that in terms of branch expansion, deposit mobilization and deployment of credit and regarding nonperforming assets, the performance of the public sector banks is extremely good. The NPAs of this group has been showing a decreasing trend during the study period. The study reveals that the reduction of NPA is mainly due to write off bad debts and expansion of total advances over the years. T V Gopalakrishnan in year 1999
Effective Management of NPAs

The Research Study on Management of Non-Performing Advances (with specific reference to Public Sector Banks) brought out their inevitable presence in the progressive credit portfolio of banks. These NPAs need not, however, require bail out measures either by the Government of India or the RBI, if the banks were to have a model to reduce their effect on the overall health of the Credit System. Not all NPAs, the study clearly established, result in losses. The study has revealed that the PSBs be lined for treasury management and retail banking as easier recourse to off-load their surplus liquidity in their anxiety to unburden the burgeoning NPAs. The banks' long-term vision on the basic banking business got blurred in the process. Despite interest rate pressures, the deposits with PSBs became safe havens. Coupled with the relaxed regulatory requirements and dearth of well rated borrowers to avail credit at not so attractive terms and conditions, are the banks left with Hobson's choice? In view of this background, the study has come out with a statistical model by way of solution to contain
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formation of NPAs in future, to bring back the confidential level of bankers to improve the credit culture and expand credit in the required direction. The borrowers have an important role to play to improve the credit off take from banks and have to project a better image of them in the credit market, the study concedes.
Repo rt on Max i mi si ng Val u e n -Perfo rmi n g Ass et s b y Organisation For Co-Operation and Development (OECD)
of
No
This report deals with the changing dynamics in Asian Non Performing Loans and the sociological reflections on Insolvency reforms in East Asia. But more importantly it mentions different country reports of Asian region. In case of India Sumant Batra discusses the developments in India. It tells us about what is NPA and gives an overview of non performing assets in India. It also discusses about the factors contributing to NPAs and its impact on the working of commercial banks. The legal reforms and the RBI guidelines for NPAs are discussed.
Res earch Paper on Roo ti ng Out Non -Perfo rmi n g Ass et s b y Nach ik et Mor, ICICI research centre
The paper attempts to highlight some major micro-level issues that are at the root of why unsustainable performance levels are being observed within Banks. The authors argue that unless the micro level issues are dealt with, even after the systemic issues are resolved, the problem of NPAs or other failures of the intermediation process may resurface with greater intensity. The manner in which banks manage the three phases in the life cycle of an asset (creation, monitoring and recovery) determines the quality of the intermediation process within a bank. In this paper, the need for internally consistent business models to guide the behaviour of a bank in each of these three phases is discussed.
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OBJECTIVES OF THE STUDY
Primary objective:
To evaluate NPAs (Gross and Net) in different banks. To evaluate NPA level in different economic situation. To Know the Concept of Non Performing Asset To know why NPAs are the great challenge to the Public & Private Sector Banks.
Secondary objectives:
To understand what are the underlying reasons for the emergence of the NPAs. To understand the impacts of NPAs on the operations of the Public Sector & Private Banks. To know what steps are being taken by the Indian banking sector to reduce the NPAs? To evaluate the comparative ratios of the Public & Private Sector Banks with concerned to the NPAs.
36
LIMITATIONS OF THE STUDY
It was critical for me to gather the financial data of the every bank of the Public Sector Banks so the better evaluations of the performance of the banks are not possible. Since my study is based on the secondary data, the practical operations as related to the NPAs are adopted by the banks are not learned. Since the Indian banking sector is so wide so it was not possible for me to cover all the banks of the Indian banking sector.
37
Chapter 4
ANALYSIS OF NPA
38
NET NPA TO NET ADVANCES
The ratio of NPA to advances is an important indicator of the Private & Public Banks performance as it is expected that an increasing Net advances would result in an increasing NPA. Hence it becomes essential to understand the trends in the ratio of NPA to Net Advances.
TABLE-1
PRIVATE BANKS YEARS 2006 2007 2008 2009 2010 Mean S.d. COV. Overall mean 1.08 ICICI 0.72 1.02 1.55 2.09 2.12 1.5 0.56103 0.37402 Axis 0.98 0.72 0.42 0.4 0.4 0.584 0.23234 0.39785 HDFC 0.44 0.43 0.47 0.63 0.31 0.456 0.10268 0.22518 KOTAK 0.24 1.98 1.78 2.39 1.73 1.624 0.73 0.44951 ING 1.76 0.95 1.05 1.2 1.2 1.232 0.28053 0.2277 BOB 0.87 0.6 0.47 0.31 0.34 0.518 0.2039 0.39363 BOI
PUBLIC BANKS DENA 1.49 0.74 0.52 0.44 1.31 0.9 0.42375 0.47083 3.04 1.99 0.94 1.09 1.21 1.654 0.78217 0.47289 1.27 SBI 1.88 1.56 1.78 1.79 1.72 1.746 0.10613 0.06079 CBI 2.59 1.7 1.45 1.24 0.69 1.534 0.626 0.405
39
ANLYSIS OF PRIVATE BANKS

From the above table it revels that in icici bank ratio is continuously increasing. In 2006 it was 0.72 & than increasing 1.02,1.55 & so on. It varies between 0.72 to 2.12. It was highest in year 2009 & it was lowest in year 2006. In this bank it looks as increasing trend. The average ratio was 1.5 . In axis bank ratio is continuously decreasing. In 2006 it was 0.98 & than decreasing IN 2007 it was 0.72,& in year 2008 it was 0.42 & in year 2009 it was 0.4 in year 2010 it was 2.12. It varies between 0.4 to 0.98. It was highest in year 2006 & it was lowest in year 2010. The average was 0.584.
In hdfc bank ratio is sometime increasing & sometime decreasing in 2006 It was 0.44, 2007 It was 0.43,in 2008 it was 0.47 in 2009 it was 0.63 & than in 2010 it was decreased to 0.31. It was highest in year 2009 & it was lowest in year 2006. The average was 0.456. The co efficient variance of the HDFC was 0.22 Lower the coefficient of variance greater the stability in the ratio
In kotak bank ratio is increasing from year 2006 to 2009 that is 0.24 in 2006 & than 2009 it was increased to 2.39 & in 2010 it is decreased & it was 1.73. It was highest in year 2009 & it was lowest in year 2007. The co efficient variance of the kotak was 0.44 Lower the coefficient of variance greater the stability in the ratio.
In ING 2006 ratio tends to 1.76 than in decreased & in 2007 it was 0.95 than it is continuously increasing & in 2010 it was 1.2. It was highest in year 2006 & it was lowest in year 2007. The co efficient variance of the ing was 0.22. Lower the coefficient of variance greater the stability in the ratio.
40
ANLYSIS OF PUBLIC BANKS

FOR BOB it is continuously decreasing. In 2006 it was 0.87 & then decreasing to 0.6 in 2007.It decreases from 0.60 to 0.34 in year 2010. Average ratio was 0.52 which is less than over all ratio i.e. 1.27 which shows that it has good NPA management.
FOR BOI it is continuously decreasing from 2006 i.e. 1.49 to 0.44 in year 2009 & then increasing to 1.31 in 2010 from 0.44. Average ratio was 0.90 which is less than over all ratio i.e. 1.27 which shows that it has good NPA management. FOR DENA BANK it is continuously decreasing from 2006 i.e. 3.04 to 0.94 in year 2008 & then increasing to 1.09 in 2009 and 1.31 in 2010. Average ratio was 1.65 which is higher than over all ratio i.e. 1.27 which shows that it has poor NPA management.
FOR SBI it is flexible decreasing from 2006 i.e. 1.88 to 1.56 in year 2007 & then increasing to 1.78 in 2008,1.79 in 2009 and then decrease to 1.72 in 2010. Average ratio was 1.75 which is higher than over all ratio i.e. 1.27 which shows that it has poor NPA management. FOR CBI it is continuously decreasing. In 2006 it was 2.59 & then decreasing to 0.69 in year 2010. Average ratio was 1.53 which is higher than over all ratio i.e. 1.27 which shows that it has poor NPA management.
41
TESTING OF HYPOTHESIS Ho: There is no significance difference in Net NPA to Net Advances ratio within selected Public & Private sector Banks during the study period. H1 : There is significant difference in Net NPA to Net Advances ratio within selected Public & Private sector Banks during the study period
TABLE-1.1
Source of Variation Rows(Year) Columns(Bank s) Error Total S S 0.74008 8 11.8417 7 10.3837 9 22.9656 5 df 4 9 36 49 MS 0.18502 2 1.31575 2 0.28843 9 F 0.6414 6 4.56163 5 F crit 2.63353 2 2.15260 7
For Rows(Year) calculated value is 0.64 <2.63 tabulated value For Columns(Banks) calculated value is 4.56>2.15 tabulated value From the above table we can see that in Rows(Year) i.e. year wise and in Columns(Banks) i.e. Public & Private sector Banks So, null hypothesis that there is no significance difference in Net NPAs to Net Advances ratio in selected Public & Private sector Banks during the study period is accepted, it means that there is no significant difference in Net NPAs to Net Advances ratio during study period for the Public & so Private sector Banks (Columns(Banks)) hypothesis is there is significant difference in Net NPAs to Net Advances ratio in all the Public & Private sector Banks.
42
INTEREST INCOME TO WORKING FUNDS
The above discussion on the operating expense to total income of all these Private & Public Banks has indicated that the Private & Public Banks have differed in their share on operating expenses to total income. This indicates that there is no difference in the ratio of operating profit to total operating expenses. This ratio is a part of it as this ratio also measures the profit to total fund.
TABLE-2
PRIVATE BANKS YEARS 2006 2007 2008 2009 2010 Mean S.D . COV. Overall mean 8 7.47 ICICI 6.94 7.03 8.04 8.29 8.11 7.682 0.6436 0.0838 Axis 1.78 7.42 8.08 8.59 7.73 6.72 2.7955 0.416 HDFC 7.11 8.01 8.42 9.28 8.39 8.242 0.7852 0.0953 Kotak 8.15 8.98 9.48 11.44 9.96 9.602 1.2264 0.1277 ING 7.76 7.34 7.91 8.26 6.86 7.42 7.738 0.3749 0.0484 7.216 0.502 0.0696 7.39 0.513 0.0694 7.752 0.5064 0.0653 7.188 0.2244 0.0312 7.828 0.2406 0.0307 7.14 7.96 6.8 7.56 BOB 6.59 7.22 7.63 7.78 BOI 6.78 7.23 7.71 8.09 PUBLIC BANKS DENA 7.03 7.47 7.97 8.33 SBI 7.19 7.34 7.32 7.29 CBI 7.78 7.77 7.81 8.22
43

In icici bank interest income to working funds continuously from 2006 to 2010. In 2006 it was 6.94 in 2007 7.03 in 2008-8.04 2009-8.29 & in 2010 it was 8.11. It was highest in year 2009 & it was lowest in year 2006. The average of the ratio was 7.68. The co efficient variance of the icici was 0.08 Lower the coefficient of variance greater the stability in the ratio. In axis bank from 2006 to 2009 it is increasing continuously but in 2010 it was 7.73. it ranges between 1.78 to 8.59. in 2006 1.78, 2007 7.42, 2008 8.08,2009 it was 8.29. The average of the ratio was 6.72 The co efficient variance o was 0.416 Lower the coefficient of variance greater the stability in the ratio. In hdfc bank in 2007 it is 7.11 in 2007 it is 8.01 2008 it was 8.42 & in 2009 it is 9.28 than it is decreased to 8.39. It was highest in year 2009 & it was lowest in year 2006. The average of the ratio was 8.24 The co efficient variance o was 0.09 Lower the coefficient of variance greater the stability in the ratio In kotak it was continuously increasingly but in 2010 it was decreased from 11.44 to 9.96. in year 2006 8.15 in 2007 8.98, in 2008 9.48 in 2009 11.44. It was highest in year 2009 In ing in 2006 it was 7.76 in 2007 it was 7.34 than in 2008 it was 7.91 & in 2010 it was 7.42. It was highest in year 2009 & it was lowest in year 2007.
44

For BOB the interest income to working funds ratio is increasing from 6.59% in 2005-06 to 7.78% in 2008-09. Then it decreased 6.86% in 200910.Which shows the good profitability of the bank. The average ratio was 7.22% which is lower than overall ratio i.e. 7.47%.
For BOI it was continuously increasing but in 2010 it was decreased from 8.09 to 7.14.It was highest in year 2009 i.e. 8.09 and lowest in year 2010 i.e. 7.14. The average ratio was 7.39% which is lower than overall ratio i.e. 7.47%..
For DENA BANK it was continuously increasing but in 2010 it was decreased from 8.33 to 7.96.It was highest in year 2009 i.e. 8.33 and lowest in year 2006 i.e. 7.03. The average ratio was 7.75% which is higher than overall ratio i.e. 7.47%.
For SBI it was FLEXIBLE it was increased from 7.19% to 7.34 in 2007 but continuously decreased from 7.34 to 6.80 from 2007 to 2010.It was highest in year 2007 i.e. 7.34 and lowest in year 2010 i.e. 6.80. The average ratio was 7.19% which is lower than overall ratio i.e. 7.47%.
For CBI it was FLEXIBLE it was decreased from 7.78% to 7.77 in 2007 then continuously increased from 7.77 to 8.22 from 2007 to 2009 then decreased to 7.56 in 2010.It was highest in year 2009 i.e. 8.22 and lowest in year 2010 i.e. 7.56. The average ratio was 7.83% which is lower than overall ratio i.e. 7.47%.
45
TESTING OF HYPOTHESIS Ho: There is no significance difference in Interest Income to Working Funds ratio within selected Public & Private sector Banks during the study period. H1 : There is significant difference within Interest Income to Working Funds
TABLE-2.1
Source of Variation Rows(Year) Columns(Ban ks) Error Total S S 18.4254 1 27.3615 4 27.0556 7 72.8426 2 df 4 9 36 49 MS 4.60635 2 3.04017 1 0.75154 6 F 6.12916 5 4.0452 2 F crit 2.63353 2 2.15260 7
For Rows(Year) calculated value is 6.12>2.63 tabulated value For Columns(Banks) calculated value is 4.04 >2.15tabulated value From the above table we can see that in Rows(Year) i.e. year wise and in Columns(Banks) i.e. Public & Private sector Banks So, null hypothesis that there is no significance difference in Interest Income to Working Funds ratio in selected Public & Private sector Banks during the study period is , it means that there is significant difference in Interest Income to Working Funds ratio during study period But for the Public & Private sector Banks (Columns(Banks)) hypothesis is so there is no significant difference in Net Interest Income to Working Funds ratio in all the Public & Private sector Banks
46
GROSS NPA TO TOTAL ASSETS
In this ratio gross NPA is to be measured by the Private & Public Banks to the total assets. In any case the NPA ratios should be less in numbers. So, less the ratio better the performance of the Private & Public Banks
TABLE-3
YEARS 2006 2007 2008 2009 2010 Mean S.D . COV. Overall mean 0.84 1.76 PRIVATE BANKS ICICI 0.9 1.2 1.89 2.58 2.64 1.842 0.7879 0.4278 Axis 0.75 0.57 0.45 0.6 0.72 0.618 0.1211 0.196 HDFC 0.69 0.72 0.22 1.08 1.74 0.89 0.5649 0.6347 Kotak 0.37 0.01 0.01 0.23 0.2 0.164 0.1545 0.9423 ING 1.07 0.65 0.45 0.65 0.69 0.702 0.2261 0.3221 BOB 2.11 1.46 1.1 0.81 0.86 1.268 0.5363 0.4229 BOI 2.21 1.48 1.08 1.1 1.78 1.53 0.4782 0.3126 PUBLIC BANKS DENA 3.58 2.37 1.48 1.28 1.11 1.964 1.0256 0.5222 SBI 2.1 1.76 1.78 1.63 1.85 1.824 0.1736 0.0952 CBI 3.59 2.77 1.9 1.57 1.35 2.236 0.93 0.4159
47

In icici bank gross npa to total assets ratio varies 0.9 to 2.64. In 2006 it was 0.9 in 2007 it was 1.2 in 2008 it was 1.89 in 2009 it was 2.58 in year 2010 it was 2.64.it was highest in year 2010 & it was lowest in year 2006. The average of the ratio was 1.842 The co efficient variance o was 0.42 Lower the coefficient of variance greater the stability in the ratio In axis bank gross npa to total assets ratio varies 0.6 to 0.75. In 2006 it was 0.75 in 2007 it was 0.57 in 2008 it was 0.45 in 2009 it was 0.6 in year 2010 it was 0.72.it was highest in year 2010 & it was lowest in year 2008. The average of the ratio was 0.618 The co efficient variance was 0.196 Lower the coefficient of variance greater the stability in the ratio In hdfc bank gross npa to total assets ratio varies 0.2 to 1.74. In 2006 it was 0.69 in 2007 it was 0.72 in 2008 it was 0.22 in 2009 it was 1.08 in year 2010 it was 1.74 .it was highest in year 2010 & it was lowest in year 2008. In kotak bank gross npa to total assets ratio varies 0.01 to 0.37. In 2006 it was 0.37 in 2007 it was 0.01 in 2008 it was 0.01 in 2009 it was 0.23 in year 2010 it was 0.2 it was highest in year 2006 & it was lowest in year 2007. In ing bank gross npa to total assets ratio varies 0.45 to 0.37. In 2006 it was 0.37 in 2007 it was 0.01 in 2008 it was 0.01 in 2009 it was 0.23 in year 2010 it was 0.2 it was highest in year 2006 & it was lowest in year 2007.
48

For BOB it was continuously decreasing from 2.11 in 2006 to 0.81 in 2009 but in 2010 it was increased from 0.81 to 0.86.It was highest in year 2006 i.e. 2.11 and lowest in year 2009 i.e. 0.81. The average ratio was 1.27% which is lower than overall ratio i.e. 1.76%.
For BOI it was FLEXIBLE it was decreased from 2.21% in 2006 to 1.08 in 2008 but further increased from to 1.10 in 2009 then increased to 1.78 in 2010.It was highest in year 2006 i.e. 2.21 and lowest in year 2009 i.e. 1.08. The average ratio was 1.53% which is lower than overall ratio i.e. 1.76%.
For SBI it was continuously decreasing from 2.10 in 2006 to 1.63 in 2009 but in 2010 it was increased from 1.63 to 1.85.It was highest in year 2006 i.e. 2.10 and lowest in year 2009 i.e. 1.63. The average ratio was 1.82% which is higher than overall ratio i.e. 1.76%. For CBI it was continuously decreasing from 3.59 in 2006 to 1.35 in 2010.It was highest in year 2006 i.e. 3.59 and lowest in year 2009 i.e. 1.35. The average ratio was 2.24% which is higher than overall ratio i.e. 1.76%.
49
TESTING OF HYPOTHESIS Ho: There is no significance difference in Gross NPA to Total Assets ratio within selected Public & Private sector Banks during the study period.
H1 : There is significant difference in Gross NPA to Total Assets ratio within selected Public & Private sector Banks during the study period.
TABLE-3.1
Source of Variation Rows(Year) Columns(Ban ks) Error Total S S 2.82238 8 21.1021 8 11.1492 1 35.0737 8 Df 4 9 36 49 MS 0.70559 7 2.34468 6 0.309 7 F 2.27832 2 7.57082 3 F crit 2.63353 2 2.15260 7
For Rows (Year) calculated value is 2.27<2.63 tabulated value For Columns (Banks) calculated value is 7.57>2.15tabulated value From the above table we can see that in Rows (Year) i.e. year wise and in Columns (Banks) i.e. Public & Private sector Banks So, null hypothesis that there is no significance difference in Gross NPAs to Total assets ratio in selected Public & Private sector Banks during the study period is , But for the Public & Private sector Banks (Columns(Banks)) hypothesis is so there is significant difference in Gross NPAs to Total assets ratio in all the Public & Private sector Banks.
50
OPERATING EXPENCE TO TOTAL INCOME
It measures the movement in operating expense .in relation to total income
TABLE-4
YEARS 2006 2007 2008 2009 2010 Mean S.D . COV. Overall mean
PRIVATE BANKS ICICI 27.22 23.34 21.64 18.88 17.89 21.794 3.7279 0.1711 Axis 22.09 22.09 24.98 32.99 23.77 25.184 4.531 0.1799 HDFC 30.88 25.6 30 28.77 28.03 28.656 2.0308 0.0709 27.29 Kotak 41.33 37.98 34.76 35.88 12.88 32.566 11.286 0.3465 ING 38.2 32.2 29.9 27 28 31.06 4.4574 0.1435 BOB 29.16 24.5 100 20.03 19.54 38.646 34.518 0.8932 BOI
PUBLIC BANKS DENA 25.53 24.36 20.61 19.81 18.44 21.75 3.0463 0.1401 25.55 SBI 27 26.86 21.87 24.53 28.62 25.776 2.6254 0.1019 CBI 29.01 24.51 19.87 16.19 16.13 21.142 5.5792 0.2639 25.75 24.28 18.28 15.95 17.9 20.432 4.3075 0.2108
51
Operating expenses to total income ratio in icici bank in 2006 it was 27 in 2007 it was 23 in 2008 it was 21 in 2009 it was 18 & in 2010 it was 17. The average of the ratio was 21.79 The co efficient variance was 0.1711 Lower the coefficient of variance greater the stability in the ratio. In axis bank in 2006 & in 2007 it was 22 & in 2008 it was 24 & than in 2010 it was 28. The average of the ratio was 25.18 & variance was 0.17. Lower the coefficient of variance greater the stability in the ratio. In hdfc bank the ratio various to 25 to 30. In 2006 it was 30 in 2007 it was 25 in 2008 it was 30 in year 2009 it was 28 in year 2010 it was.28.03. The average of the ratio was 28.65 & variance was 0.07. Lower the coefficient of variance greater the stability in the ratio. In Kotak bank in 2006 it was 41 in 2007 it was 37 In 2008 it was 34 in 2009 it was 35 & in 12. The average of the ratio was 32.56 & variance was 0.34. Lower the coefficient of variance greater the stability in the ratio. In ING bank in 2006 it was 38 in 2007 it was 32 In 2008 it was 29 in 2009 it was 27 & in 28.It was highest in year 2006 & lowest in year 2009. The average of the ratio was 31.06 The co efficient variance was 0.141 Lower the coefficient of variance greater the stability in the ratio.
52

For BOB this ratio was continuously decreasing from 29.16 in 2006 to 19.54 in 2010.It was highest in year 2006 i.e. 29.16 and lowest in year 2010 i.e. 19.54. The average ratio was 38.65% which is higher than overall ratio i.e. 25.55% which shows less profitability.
For BOI this ratio was continuously decreasing from 25.75 in 2006 to 17.90 in 2010.It was highest in year 2006 i.e. 25.75 and lowest in year 2010 i.e. 17.90. The average ratio was 20.43% which is higher than overall ratio i.e. 25.55% which shows less profitability.
For DENA BANK this ratio was continuously decreasing from 25.53 in 2006 to 18.44 in 2010.It was highest in year 2006 i.e. 25.53 and lowest in year 2010 i.e. 18.44. The average ratio was 21.75% which is higher than overall ratio i.e. 25.55% which shows less profitability.
For SBI was 27.00 in 2006, 26.86 in 2007, 21.87 in 2008, 24.53 in 2009 and it was 28.62 & in 2010. The average ratio was 25.78% which is higher than overall ratio i.e. 25.55% which shows less profitability.
For CBI was 29.01 in 2006, 24.51 in 2007, 19.87 in 2008, 16.19 in 2009 and it was 16.13 & in 2010. The average ratio was 21.14% which is lower than overall ratio i.e. 25.55% which shows higher profitability.
53
TESTING OF HYPOTHESIS Ho: There is no significance difference in Operating Expenses to Total Income ratio within selected Private & Public Banks during the study period. H1: There is significant difference in Operating Expenses to Total Income ratio within selected Private & Public Banks during the study period
TABLE-4.1
Source of Variation Rows(Year) Columns(Banks) Error Total S S 8818.07 3 2176.64 4 5620.56 3 16615.2 8 df 7 9 63 79 MS 1259.72 5 241.849 3 89.2152 8 F 14.1200 5 2.71085 1 F crit 2.15882 9 2.03224 2
For Rows(Year) calculated value is 14.12 >2.15tabulated value For Columns(Banks) calculated value is 2.71>2.03 tabulated value From the above table we can see that in Rows (Year) i.e. year wise and in Columns(Banks) i.e. Public & Private Banks So, null hypothesis that there is no significance difference in Operating Exp. To total Income ratio in rejected in Public & Private Banks during the study period is , it means that there is significant difference in Net NPAs to Net Advances ratio during study period But for the Public & Private Banks To total Income ratio in all the Private & Public Banks. (Columns(Banks)) hypothesis is rejected so there is significant difference in Operating Exp.
54
GROSS NPA TO GROSS ADVANCES
With increasing advances the gross NPA is also expected to increase correspondingly. The efficiency of the Private & Public Banks lies in reducing the share of the NPA to Total Advances.
TABLE-5
PRIVATE BANKS ICICI 1.55 2.012 3.32 4.49 5.31 3.3364 1.5946 0.478 Axis 1.67 1.13 0.83 1.09 1.26 1.196 0.3075 0.2571 HDFC 1.32 1.34 1.34 1.98 1.43 1.482 0.2816 0.19 1.65 Kotak 0.34 0.04 0.02 0.03 0.03 0.092 0.1388 1.5089 ING 4.09 1.05 0.79 1.86 2.96 2.15 1.3751 0.6396 BOB 3.9 2.5 1.8 1.27 1.36 2.166 1.0845 0.5007 BOI
PUBLIC BANKS DENA 6.4 4.1 2.4 2.1 1.81 3.362 1.9171 0.5702 3.03 SBI 3.6 2.9 3 2.8 3.09 3.078 0.3113 0.1011 CBI 7.16 4.97 3.22 2.71 2.33 4.078 1.9973 0.4898 3.72 2.42 1.68 1.71 2.85 2.476 0.8531 0.3445
55

In icici bank gros npa to gross advances ratio varies 1.55 to 4.49. In 2006 it was 1.55in 2007 it was 2.01 in 2008 it was 3.32 in 2009 it was 4.49 in year 2010 it was 5.31.it was highest in year 2010 & it was lowest in year 2006. In axis bank gros npa to gross advances ratio varies 0.83 to 1.67. In 2006 it was 1.67 in 2007 it was 1.13 in 2008 it was 0.83 in 2009 it was 1.09 in year 2010 it was 1.26 .it was highest in year 2006 & it was lowest in year 2008. In hdfc bank gros npa to gross advances ratio varies 1.32 to 1.98. In 2006 it was 1.32 in 2007 it was 1.34 in 2008 it was 1.34 in 2009 it was 1.98 in year 2010 it was 1.43 .it was highest in year 2009 & it was lowest in year 2006 In kotak bank gros npa to gross advances ratio varies 0.02 to 0.34. In 2006 it was 0.34 in 2007 it was 0.04 in 2008 it was 0.02 in 2009 it was 0.03 in year 2010 it was 0.03 .it was highest in year 2006 & it was lowest in year 2008 In ing bank gros npa to gross advances ratio varies 0.79 to 4.09. In 2006 it was 4.09 in 2007 it was 1.05 in 2008 it was 0.79 in 2009 it was 1.86 in year 2010 it was 2.96 .it was highest in year 2006 & it was lowest in year 2008
56
For BOB the ratio is showing downward trend which shows good GROSS NPA management. But in 2010 it was increased to 1.36 from 1.27. In 2006 the ratio was highest i.e. 3.9 and lowest i.e. 1.27 in 2009. Average ratio is 2.17 which is lower than overall public sector bank average ratio i.e.3.03 which shows that BOB has good GROSS NPA management. For BOI also the ratio is showing downward trend which shows good GROSS NPA management. But in 2010 it was increased to 2.85 from 1.71. In 2006 the ratio was highest i.e. 3.72 and lowest i.e. 1.68 in 2008. Average ratio is 2.48 which is lower than overall public sector bank average ratio i.e.3.03 which shows that BOI has good GROSS NPA management. For DENA also the ratio is showing downward trend which shows good GROSS NPA management. In 2006 the ratio was highest i.e. 6.4 and lowest i.e. 1.81 in 2010. Average ratio is 3.36 which is higher than overall public sector bank average ratio i.e.3.03 which shows that BOI is decreasing Gross NPA level but in overall management it lacks. For SBI the ratio is showing flexible trend which shows unsystematic GROSS NPA management. In 2006 the ratio was highest i.e. 3.60 and lowest i.e. 2.80 in 2009. Average ratio is 3.08 which is almost same as overall public sector bank average ratio i.e.3.03 which shows that SBI has also good GROSS NPA management as per overall management. For CBI also the ratio is showing downward trend which shows good GROSS NPA management. In 2006 the ratio was highest i.e. 7.16 and lowest i.e. 2.33 in 2010. Average ratio is 4.08 which is highest among all banks and more than overall public sector bank average ratio i.e. 3.03 which shows that BOI has poor GROSS NPA management. In over all BOB has best performance which has lowest mean i.e. 2.17 and CBI has poorest performance which has highest mean i.e. 4.08.
57
TESTING OF HYPOTHESIS Ho: There is no significance difference in Gross NPA to Gross Advances ratio within selected Public & Private sector Banks during the study period.
H1: There is significant difference in Gross NPA to Gross Advances ratio within selected Public & Private sector Banks during the study period
TABLE-5.1
Source of Variation Rows(Year) Columns(Banks ) Error Total S S 14.5231 5 63.9291 7 42.6460 3 121.098 3 Df 4 9 36 49 MS 3.63078 7 7.10324 1 1.18461 2 F 3.06495 9 5.9962 6 F crit 2.63353 2 2.15260 7
For Rows(Year) calculated value is 3.06>2.63 tabulated value For Columns(Banks) calculated value is 5.99>2.15 tabulated value From the above table we can see that in Rows(Year) i.e. year wise and in Columns(Banks) i.e. Private & Public Banks So, null hypothesis that there is no significance difference in Gross NPA to Gross Advances ratio in rejected Private & Public Banks during the study period is rejected, it means that there is significant difference in Gross NPAs to Gross Advances ratio during study period (year wise) But there is significant difference in Gross NPAs to Gross advances in selected Private & Public Banks because in Columns(Banks) F>Fc (5.99>2.15) so that way null hypothesis is rejected.
58
NET NPA TO TOTAL ASSETS
In the case of Private & Public Banks, the assets indicate Private & Public Banks advances and investment. With increasing assets there is a risk of increasing NPA. In such context, the efficiency of the Private & Public Banks lies in controlling the increasing NPA. Hence, the present paragraph attempts to discuss trends in the share of NPA to Total Assets. Lower the ratio, the better the performance of the PRIVATE & PUBLIC BANKS.
TABLE-6
PUBLIC BANKS DENA 1.63 1.16 0.56 0.65 0.74 0.948 0.4452 0.4696 0.73 SBI 0.99 0.93 1.03 1 1.03 0.996 0.041 0.0412 CBI 1.3 0.94 0.86 0.72 0.4 0.844 0.3278 0.3884 0.86 0.45 0.33 0.28 0.8 0.544 0.2691 0.4947
59

In icici bank net npa to total assets ratio varies 1.21 to 0.42. In 2006 it was 0.42 in 2007 it was 0.58 in 2008 it was 0.89 in 2009 it was 1.21 in year 2010 it was1.07 .it was highest in year 2009 & it was lowest in year 2006 In axis bank net npa to total assets ratio varies 0.22 to 0.44. In 2006 it was 0.44 in 2007 it was 0.36 in 2008 it was 0.22 in 2009 it was 0.22 in year 2010 it was 0.23 .it was highest in year 2006 & it was lowest in year 2007 In hdfc bank net npa to total assets ratio varies 1.74 to 0.17. In 2006 it was 0.27 in 2007 it was 0.17 in 2008 it was 0.22 in 2009 it was 0.34 in year 2010 it was 1.74 .it was highest in year 2010 & it was lowest in year 2007 In kotak bank net npa to total assets ratio varies 0.01 to 0.1. In 2006 it was 0.03 in 2007 it was 0.01in 2008 it was 0.9 in 2009 it was 0.13 in year 2010 it was 0.09 .it was highest in year 2008 & it was lowest in year 2007 In ing bank net npa to total assets ratio varies 1.07 to 0.4. In 2006 it was 1.07 in 2007 it was 0.59 in 2008 it was 0.4 in 2009 it was 0.62 in year 2010 it was 0.65 .it was highest in year 2006 & it was lowest in year 2008
60
For BOB the ratio is showing downward trend which shows good NPA management. In 2006 the ratio was highest i.e. 0.46 and lowest i.e. 0.2 in 2009. Average ratio is 0.3 which is lower than overall public sector bank average ratio i.e. 0.73 which shows that BOB has good NET NPA management. For BOI also the ratio is showing downward trend which shows good NPA management. But in 2010 it was increased to 0.8 from 0.28. In 2006 the ratio was highest i.e. 0.86 and lowest i.e. 0.28 in 2009. Average ratio is 0.54 which is lower than overall public sector bank average ratio i.e. 0.73 which shows that BOI has good NET NPA management. For DENA BANK also the ratio is showing almost downward trend which shows good NPA management. But in 2010 it was increased to 0.74 from 0.65. In 2006 the ratio was highest i.e. 1.63 and lowest i.e. 0.56 in 2008. Average ratio is 0.95 which is higher than overall public sector bank average ratio i.e. 0.73 which shows that BOI has not good NET NPA management. For SBI the ratio is showing flexible trend which shows unsystematic NET NPA management. In 2008 and 2010 the ratio was highest i.e. 1.03 and lowest i.e. 0.93 in 2007. Average ratio is 0.996 which is higher than overall public sector bank average ratio i.e. 0.73 which shows that SBI has also not good NET NPA management as per overall management.
61
For CBI also the ratio is showing downward trend which shows good NET NPA management. In 2006 the ratio was highest i.e. 1.3 and lowest i.e. 0.4 in 2010. Average ratio is .844 which is higher than overall public sector bank average ratio i.e. 0.73 which shows that CBI has also not good NET NPA management as per overall management.
In over all BOB has best performance which has lowest mean i.e. 0.3 and SBI has poorest performance which has highest mean i.e. 0.996.
62
TESTING OF HYPOTHESIS Ho: There is no significance difference in Net NPA to Total Assets ratio within Selected Public & Private sector Banks during the study period. H1: There is significant difference in Net NPA to Total Assets ratio within selected Public & Private sector Banks during the study period
TABLE-6.1
Source of Variation Rows(Year) Columns(Ban ks) Error Total S S 0.36005 2 3.58612 2 4.28210 8 8.22828 2 Df 4 9 36 49 MS 0.09001 3 0.39845 8 0.11894 7 F 0.75674 6 3.34986 6 F crit 2.63353 2 2.15260 7
For Rows(Year) calculated value is 0.75 < 2.63 tabulated value For Columns(Banks) calculated value is 3.34>2.15 tabulated value From the above table we can see that in Rows (Year) i.e. year wise and in Columns (Banks) i.e. Public & Private sector Banks. So, null hypothesis that there is no significance difference in Net NPA to Total Assets ratio in selected & Public & Private sector Banks Columns (Banks) wise during the study period is rejected, it means that there is significant difference in Net NPA to Total Assets ratio during study period for the Public & Private sector Banks (Columns(Banks)) hypothesis is .
63
NET PROFIT TO TOTAL ASSETS
This ratio measures return on assets employed or the efficiency in utilization of the assets. It is arrived by dividing the net profit by total assets.
TABLE-7
PUBLIC BANKS DENA 0.27 0.64 0.93 0.87 0.89 0.72 0.2759 0.3831 0.77 SBI 0.89 0.8 0.93 0.95 0.87 0.888 0.0585 0.0659 CBI 0.34 0.54 0.44 0.39 0.58 0.458 0.1006 0.2196 0.62 0.79 1.12 1.33 0.63 0.898 0.3149 0.3507
64
NET PROFIT TO TOTAL assets ratio in icici bank in 2006 it was 0.9 in 2007 0.007 in 2008 0.8 in 2009 it was 0.7 & in 2010 it was 0.8. The average of the ratio was 0.78 & variance of the ratio was 0.10 In axis bank in 2006 & in 2007 it was 1.18 & 1.1 & in 2008 it was 1.24 & than in 2010 it was 1.67. The average of the ratio was 1.32 & variance of the ratio was 0.1733. In hdfc bank the ratio various to 1.28 to1.53. In year 2006 it was 1.38 in year 2007 it was 1.33 in year 2008 it was 1.32 in year 2009 it was 1.28 In 2010 it was 1.53. The average of the ratio was 1.36 & variance of the ratio was 0.07 In Kotak bank in 2006 it was 1.72 in 2007 it was 1.03 In 2008 it was 1.1 in 2009 it was 0.94 & in 2010 1.39. 2006 it was highest in in year 2009 it was lowest. The major diffirance is between year 2006 to 2009. In ING bank in 2006 it was 0.05 in 2007 it was 0.52 In 2008 it was 0.74 in 2009 it was 0.7 & in 2010 0.8. in 2008 it was highest in in year 2006 it was lowest. The major diffirance is between year 2006 t0 2010. The average of the ratio was 0.562 & the variance of the ratio was 0.542
65
ANLYSIS OF PIBLIC BANKS
For BOB this ratio was continuously increasing after 2007 it decreases from 0.73 in 2006 to 0.72 in 2007 then it increases to 1.10 in 2010.It was highest in year 2010 i.e. 1.10. The average ratio was 0.87% which is higher than overall ratio i.e. 0.77% which shows high profitability. For BOI this ratio was continuously increasing from 0.62 in 2006 to 1.33 in 2009 then it decreases to 0.63 in 2010.It was highest in year 2009 i.e. 1.33. The average ratio was 0.90% which is higher than overall ratio i.e. 0.77% which shows high profitability.
For DENA BANK this ratio was increasing from 0.27 in 2006 to 0.93 in 2008 then it decreases to 0.87 in 2009 and then increases to 0.89 in 2010. The average ratio was 0.72% which is less than overall ratio i.e. 0.77% which shows low profitability.
For SBI this ratio was decreasing from 0.89 in 2006 to 0.80 in 2007 then it increases to 0.95 in 2009 and then decreases to 0.87 in 2010. The average ratio was 0.89% which is higher than overall ratio i.e. 0.77% which shows high profitability.
For CBI this ratio was increasing from 0.34 in 2006 to 0.54 in 2007 then it decreases to 0.39 in 2009 and then increases to 0.58 in 2010. The average ratio was 0.46% which is less than overall ratio i.e. 0.77% which shows low profitability.
66
TESTING OF HYPOTHESIS Ho: There is no significance difference in Net Profit to Assets ratio within Selected Public & Private sector Banks during the study period. H1 : There is significant difference in Net Profit to Assets ratio within Selected Public & Private sector Banks during the study period.
TABLE-7.1
Source of Variation Rows(Year) Columns(Banks) Error Total S S 0.35836 8 4.35033 8 1.56359 2 6.27229 8 Df 4 9 36 49 MS 0.08959 2 0.48337 1 0.04343 3 F 2.06275 8 11.1290 9 F crit 2.63353 2 2.15260 7
For Rows (Year) calculated value is 2.06<2.63 tabulated value For Columns (Banks) calculated value is 11.12>2.15tabulated value From the above table we can see that in Rows (Year) i.e. year wise and in Columns (Banks) i.e. Public & Private Banks So, null hypothesis that there is no significance difference in Net Profit to Total Assets ratio in selected Public & Private Banks during the study period is , it means that there is no significant difference in Net Profit to Net Advances ratio during study period for the Public & Private Banks Columns (Banks) hypothesis is rejected so there significant difference in Net Profit to Total Assets ratio in all the Public & Private Banks
67
TOTAL INVESTMENT TO TOTAL ASSET
This ratio is a tool to measure the percentage of total assets locked up in investment
TABLE-8
PRIVATE BANKS YEARS 2006 2007 2008 2009 2010 Mean S.D . COV. Overall mean 31.87 28.48 ICICI 25 23 22 30 38 27.6 6.5803 0.2384 Axis 43 36 30 31 30 34 5.6125 0.1651 HDFC 38 33 37 32 26 33.2 4.7645 0.1435 Kotak 28 34 32 31 33 31.6 2.3022 0.0729 ING 10 23 24 32 30 23.8 8.6139 0.3619 BOB 30.97 24.41 24.43 23.06 21.98 24.97 3.5069 0.1404 BOI 58.05 25.05 23.38 23.33 24.4 30.842 15.227 0.4937 PUBLIC BANKS DENA 32.29 29.36 26.61 25.74 27.25 28.25 2.6241 0.0929 SBI 32.9 26.33 26.26 28.61 27.13 28.246 2.7683 0.098 CBI 38.35 29.83 25.38 29.16 27.68 30.08 4.9283 0.1638
68
ANLYSIS OF PRIVATE BANKS TOTAL INVESTMENT TO TOTAL ASSETS ratio in icici bank in 2006 it was 25 in 2007 it was 23 in 2008 it was 22 in year 2009 it was 30 & in year 2010 it was 38. The average of the ratio was 27.6 & variance of the ratio was 0.23. In axis bank in 2006 & in 2007 it was 43 & 36 & in 2008 it was 30 & than in 2010 it was 30. in 2006 it was 43 in 2007 it was 36 in 2008 it was 31 in year 2009 it was30 & in year 2010 it was 30. The average of the ratio was 34 & variance of the ratio was 0.1651 In hdfc bank the ratio various to 26 to 38. in 2006 it was 38 in 2007 it was 33 in 2008 it was 37 in year 2009 it was 32 & in year 2010 it was 26. The average of the ratio was 33.2 & variance of the ratio was 0.1435. In Kotak bank in 2006 it was 28 in 2007 it was 34 In 2008 it was 32 in 2009 it was 31 & in 2010 it was 33. The average of the ratio was 31.6 The co efficient variance was 0.07 Lower the coefficient of variance greater the stability in the ratio In ING bank in 2006 it was 10 in 2007 it was 23 In 2008 it was 24 in 2009 it was 32 & in 2010 it was 30. The highest ratio is in the year 2009 & lowest ratio was in the year 2006. The average of the ratio was 23.8 The co efficient variance was 0.369 Lower the coefficient of variance greater the stability in the ratio
69

For BOB was 30.97 in 2006, 24.41 in 2007, 24.43 in 2008, 23.06 in 2009 and it was 21.98 & in 2010. The average ratio was 24.97% which is lower than overall ratio i.e. 28.48% which shows bad position of the bank. For BOI was 58.05 in 2006, 25.05 in 2007, 23.38 in 2008, 23.33 in 2009 and it was 24.40 & in 2010. The average ratio was 30.84% which is lower than overall ratio i.e. 28.48% which shows better position of the bank. For DENA BANK this ratio was continuously decreasing from 32.29 in 2006 to 25.74 in 2009 and then increase to 27.25 in 2010.It was highest in year 2006 i.e. 32.29 and lowest in year 2009 i.e. 25.74. The average ratio was 28.25% which is lower than overall ratio i.e. 28.48% which shows bad position of the bank. For SBI this ratio was continuously decreasing from 32.90 in 2006 to 27.13 in 2010.It was highest in year 2006 i.e. 32.90 and lowest in year 2010 i.e. 22.13. The average ratio was 28.25% which is lower than overall ratio i.e. 28.48% which shows bad position of the bank.
For CBI was 38.35 in 2006, 29.83 in 2007, 25.38 in 2008, 29.16 in 2009 and it was 27.68 & in 2010 . The average ratio was 30.03% which is higher than overall ratio i.e. 28.48% which shows better position of the bank.
70
TESTING OF HYPOTHESIS Ho: There is no significance difference in Total Investments to Total Assets ratio within selected Public & Private Banks during the study period. H1: There is significant difference in Total Investments to Total Assets ratio within selected Public & Private Banks during the study period.
TABLE-8.1
Source of Variation Rows(Year)(year) Columns(Banks)(Banks) (Banks) Error Total S S 256.691 2 498.307 5 1583.28 4 2338.28 3 df 4 9 36 49 MS 64.1728 1 55.367 5 43.980 1 F 1.45913 3 1.25892 2 F crit 2.63353 2 2.15260 7
For Rows(Year) calculated value is 1.45<2.63 tabulated value For Columns(Banks)(Banks) calculated value is 1.25<2.15tabulated value From the above table we can see that in Rows(Year) i.e. year wise and in Columns(Banks) i.e. Public & Private Banks So, null hypothesis that there is no significance difference in Total Investments to Total Assets ratio in selected Public & Private Banks during the study period is accepted, it means that there is no significant difference in Total Investments to Total Assets ratio during study period for the Public & Private Banks (Columns(Banks)) hypothesis is accepted so there is no significant difference in Total Investments to Total Assets ratio in all the Public & Private Banks
71
PERCENTAGE CHANGE IN NET NPAs
It measures the movement in Net NPAs in relation to Net NPAs in the previous year. The higher the reduction in Net NPA levels, the better it is for Private & Public Banks. Base year:- 2004-2005
TABLE-9
PRIVATE BANKS YEARS 2006 2007 2008 2009 2010 Mean S.d. COV. ICICI -0.59 0.85 0.83 0.26 -0.31 0.208 0.6532 3.1406 Axis -0.46 1 0.11 0.83 0.45 0.386 0.5853 1.5162 HDFC -1.55 0.1 0.4 0.11 0.08 -0.172 0.7815 -4.544 Kotak 0.06 6.06 0.6 0.61 0.04 1.474 2.5786 1.7494 ING -0.6 -0.3 -0.79 0.8 0.07 -0.164 0.6294 -3.838 BOB -16.40 -3.16 -1.62 -9.01 34.14 5.0875 19.628 3.8581 BOI -37.60 -34.85 -6.33 6.08 251.43 54.083 132.68 2.4532 PUBLIC BANKS DENA -26.76 -15.7 -41.1 45.58 36.43 6.3025 41.559 6.5941 SBI -8.27 7.17 41.19 30.35 12.33 22.76 15.802 0.6943 CBI 19.41 -9.67 21.07 0 -31.61 -5.053 21.867 -4.328
72

In net npa in icici bank in 2006 it was -0.59 in 2007 it was 0.85 in 2008 it was 0.83 in 2009 0.26 in 2010 it was -0.31.It was highest in year 2007 & it was lowest in year 2006. The average of the ratio was 0.208 The co efficient variance was3.14 Lower the coefficient of variance greater the stability in the ratio In net npa in axis bank in 2006 it was -0.46 in 2007 it was 1 in 2008 it was 0.11 in 2009 0.11 in 2010 it was 0.45. It was highest in year 2009 & it was lowest in year 2006. The average of the ratio was 0.386 The co efficient variance was 1.5162 Lower the coefficient of variance greater the stability in the ratio In net npa in hdfc bank in 2006 it was -1.55 in 2007 it was 0.1 in 2008 it was 0.4 in 2009 0.11 in 2010 it was 0.08. It was highest in year 2009 & it was lowest in year 2006. The average of the ratio was -0.17 The co efficient variance Lower the coefficient of variance greater the stability in the ratio In net npa in kotak bank in 2006 it was 0.06 in 2007 it was 6.06 in 2008 it was 0.6 in 2009 0.61 in 2010 it was 0.055. It was highest in year 2007 & it was lowest in year 2006. The average of the ratio was 1.47 The co efficient variance was 1.74 Lower the coefficient of variance greater the stability in the ratio In net npa in ing bank in 2006 it was -0.6 in 2007 it was -0.3 in 2008 it was -0.79 in 2009 0.8 in 2010 it was 0.07. It was highest in year 2009 & it was lowest in year 2008. The average of the ratio was -0.164 The co efficient variance was -3.83 Lower the coefficient of variance greater the stability in the ratio was -4.54
73
For BOB in 2006 percentage change in Net NPA was negative 16.40 and in 2007 percentage change in NET NPA was -3.16,and -1.62 in 2008, -9.01 in 2009. It was 34.14 in 2010. For BOI in 2006 percentage change in Net NPA was negative 37.60 and in 2007 percentage change in NET NPA was -34.85,and -6.33 in 2008, 6.08 in 2009. It was 251.43 in 2010. For DENA BANK in 2006 percentage change in Net NPA was negative 26.76 and in 2007 percentage change in NET NPA was -15.70,and -41.10 in 2008, 645.58 in 2009. It was 36.43 in 2010. For SBI in 2006 percentage change in Net NPA was negative 8.27 and in 2007 percentage change in NET NPA was 7.17,and 41.19 in 2008, 30.35 in 2009. It was 12.33 in 2010. For CBI in 2006 percentage change in Net NPA was positive 19.41 and in 2007 percentage change in NET NPA was -9.67,and 21.07 in 2008, 0 in 2009. It was 31.61 in 2010.
74
PERENTAGE CHANGE IN GROSS NPAs
It measures the movement in Gross NPAs in relation to Gross NPAs in the previous year. The higher the reduction in Gross NPA levels, the better it is for Private & Public Banks. Base year:- 2004-2005
TABLE-10
YEAR 2006 2007 2008 2009 2010 Mean S.d. COV.
PRIVATE BANKS ICICI 0.19 -0.85 -0.83 -0.27 0.01 Axis 0.16 -0.1 -0.18 -0.81 -0.46 HDFC -0.15 -0.29 -0.37 -1.19 0.06 0.388 0.47 -1.22 Kotak -0.35 -6.35 -0.6 -0.56 -0.11 ING 0.06 0.3 0.08 -0.8 -0.11 BOB -28.05 -12.47 -5.29 -6.98 30.27 4.504 21.4 1 -4.75 BOI
PUBLIC BANKS DENA -17.27 -21.58 -23.4 8.41 3.42 SBI -16.7 -3.64 28.4 22.41 24.32 CBI 2.4 -4.17 -8.74 -1.45 6.13 -21.45 -15.29 -8.05 27.96 97.67
-0.35 0.34 2 0.47 0.29 -1.36 -0.86
1.594 0.094 2.66 0.42 -1.67 -4.47
16.16 8 10.084 49.4 14.8 2 7 3.05 -1.47
10.95 8 1.166 19.9 5.75 4 1.82 4.93
75

In change in gross npa in icici bank in 2006 it was 0.19 in 2007 it was - 0.85 in 2008 it was -0.83 in 2009 -0.27 in 2010 it was 0.01.It was highest in year 2006 & it was lowest in year 2008. The average of the ratio was -0.35 The co efficient variance was -1.36127 Lower the coefficient of variance greater the stability in the ratio In change in gross npa in axis bank in 2006 -0.16 it was in 2007 -0.1 it was -0.18 in 2008 it was- 0.81 in 2009 -0.46 in 2010.It was highest in year 2007 & it was lowest in year 2009. The average of the ratio was 0.34 The co efficient variance was -0.86 Lower the coefficient of variance greater the stability in the ratio In change in gross npa in hdfc bank in 2006 it was -0.15 in 2007 it was 0.29 in 2008 it was -0.37 in 2009 -1.19 in 2010 it was 0.06 .It was highest in year 2010 & it was lowest in year 2009. The average of the ratio was -0.388 The co efficient variance was -1.22 Lower the coefficient of variance greater the stability in the ratio In change in gross npa inkotak bank in 2006 it was -0.35 in 2007 it was 6.35 in 2008 it was -0.6 in 2009 -0.56 in 2010 it was 0.11 .It was highest in year 2008 & it was lowest in year 2009. The average of the ratio was -1.59 The co efficient variance was -1.67 Lower the coefficient of variance greater the stability in the ratio In change in gross npa in ing bank in 2006 it was 0.06 in 2007 it was 0.3 in 2008 it was 0.08 in 2009 -0.8 in 2010 it was 0.11 .It was highest in year 2007 & it was lowest in year 2009. The average of the ratio was 0.09 The co efficient variance was 4.47 Lower the coefficient of variance greater the stability in the ratio
76

For BOB in 2006 percentage change in gross NPA was negative28.05 and in 2007 percentage change in gross NPA was negative12.47,and negative 5.29 in 2008, negative 6.98 in 2009. It was 30.27 in 2010. Which shows better performance of banks regarding NPA.
For BOI in 2006 percentage change in gross NPA was negative 21.45 and in 2007 percentage change in gross NPA was negative15.29,and negative 8.05 in 2008, 27.96 in 2009. It was 97.67 in 2010. For DENA BANK in 2006 percentage change in gross NPA was negative 17.27 and in 2007 percentage change in gross NPA was negative 21.58,and negative 223.08 in 2008, 8.41 in 2009. It was 3.42 in 2010. For SBI in 2006 percentage change in gross NPA was negative 16.70 and in 2007 percentage change in gross NPA was negative 3.64,and 28.40 in 2008, 22.41 in 2009. It was 24.32 in 2010. For CBI in 2006 percentage change in gross NPA was positive 2.40 and in 2007 percentage change in gross NPA was negative 4.17,and negative 8.74 in 2008, negative 1.45 in 2009. It was 6.13 in 2010.
77
CHAPTER 5
FINDING S
78
In the ratio of gross NPA to gross advances all the selected Public & Private Banks most of show declining trend which indicates that gross nonperforming assets were decreased in selected period which are basically from gross advances In the ratio of net NPA to net advances also all the selected Public & Private Banks show declining trend which indicates that net non performing assets were also decreased in selected period The ratio of net NPA to total assets indicates the share of nonperforming assets in total assets. Decline trend in this ratio shows the better performance or the better liquidity position of those Public & Private Banks. In gross NPA to total assets ratio the conclusion is same as in previous one. Overall Interest income as a percentage of working funds ratio did not have any big difference in selected Public & Private Banks. It reveals that three Public & Private Banks on an average are compatible in terms of interest income. The ratio of % change in Net NPA shows the change in the Non Performing Assets of the organization. Thats why here the 3 rd year i.e. 2008-09 is taken as a base year. This ratio shows heavy fluctuation in all the selected Public & Private Banks in the particular period. Unlike others overall this ratio also did not have any big difference in selected Public & Private Banks. all ten Public & Private Banks have a major part of its assets in investment This ratio tests the ability of the Public & Private Banks to utilize its assets. Overall Private Banks were more capable in optimum utilization of its assets in terms of net profit.
79
The ratio of Percentage change in gross NPA shows the change in the non performing assets of the organization. This ratio shows heavy fluctuation in all the selected Public & Private Banks in the particular period. This ratio indicates the proportion of the operating expenses in the total income. Less the proportion better the performance of the Public & Private Banks.
80
BIBLOGRAPHY
81
Books referred:
Annual Report of Selected Public & Private Banks M.Y. Khan: Financial Services, 1St Edition, Tata McGraw Hill Bharti Pathak Indian Financial System , 2nd Edition, Pearson Education
Websites Visited:
www.sebi.gov.in www.crisil.com www.icra.com www.rbi.org.in www.nseindia.com www.projectsperedise.com www.google,com www.wikipedia.com www.money.contol.com www.bajaj capital.com www.money.rediff.com
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COMPREHENSIVE PROJECT ON NPA MANAGEMENT IN PUBLIC & PRIVATE BANKS SUBMITTED BY

PROF. KAUSHAL BHATT

ASHISH M. PANDYA MBA

Introduction of INDIAN BANKING INDUSTRY

BANKING SYSTEM IN INDIA

Apex Banking Institution

IFCI Publi c secto r Privat e Secto r

SIDBI Cooperative Land Development Ban k

State Land Developme nt

Central (District) cooperative

Primary Land Developme nt

FUNCTIONS OF COMMERCIAL BANKS:

NATIONALIZATION OF COMMERCIAL BANKS:

THE RESERVE BANK OF INDIA [RBI]:

Non-Performing Assets - Background:` Introduction:

Indian economy and N.P.As:

Global Developments and N.P.As:

Regulations for asset classification:

iv. Loss Assets:

3.4) STATISTICAL TOOLS

TWO- WAY ANOVA TABLE

TWO-WAY ANOVA TABLE

HYPOTHESIS OF STUDY Statement for Hypothesis:

SCOPE OF THE STUDY

PERIOD OF THE STUDY

Effective Management of NPAs

OBJECTIVES OF THE STUDY

LIMITATIONS OF THE STUDY

NET NPA TO NET ADVANCES

ANLYSIS OF PRIVATE BANKS

ANLYSIS OF PUBLIC BANKS

INTEREST INCOME TO WORKING FUNDS

ANLYSIS OF PRIVATE BANKS

ANLYSIS OF PUBLIC BANKS

GROSS NPA TO TOTAL ASSETS

ANLYSIS OF PRIVATE BANKS

ANLYSIS OF PUBLIC BANKS

OPERATING EXPENCE TO TOTAL INCOME

It measures the movement in operating expense .in relation to total income

ANLYSIS OF PRIVATE BANKS

ANLYSIS OF PUBLIC BANKS

GROSS NPA TO GROSS ADVANCES

ANLYSIS OF PRIVATE BANKS

ANLYSIS OF PUBLIC BANKS

NET NPA TO TOTAL ASSETS

ANLYSIS OF PRIVATE BANKS

ANLYSIS OF PUBLIC BANKS

NET PROFIT TO TOTAL ASSETS

ANLYSIS OF PRIVATE BANKS

ANLYSIS OF PIBLIC BANKS

TOTAL INVESTMENT TO TOTAL ASSET

ANLYSIS OF PUBLIC BANKS

PERCENTAGE CHANGE IN NET NPAs

ANLYSIS OF PRIVATE BANKS

ANLYSIS OF PUBLIC BANKS

PERENTAGE CHANGE IN GROSS NPAs

YEAR 2006 2007 2008 2009 2010 Mean S.d. COV.

-0.35 0.34 2 0.47 0.29 -1.36 -0.86

1.594 0.094 2.66 0.42 -1.67 -4.47

16.16 8 10.084 49.4 14.8 2 7 3.05 -1.47

10.95 8 1.166 19.9 5.75 4 1.82 4.93

ANLYSIS OF PRIVATE BANKS

ANLYSIS OF PUBLIC BANKS